Cranes in Sydney
The image below is compelling evidence of the property boom in Sydney and Melbourne. The cranes are everywhere, is some places one can see as many as 20 within a kilometre or two. And it seems most streets in the city have houses being demolished and replaced with McMansions.
This construction boom is the main industry in Sydney, It has led to a shortage of tradesmen and now tradesmen are flying in from other states to work during the week, and then flying home for the weekend. This is reminiscent of the situation at the peak of the mining boom.
Although the supply of apartments is growing rapidly, so are prices. However, there are increasing numbers of unsold and empty apartments.
The government is worried. When the boom ends, and it will, unemployment will skyrocket. The loan books of Australia’s big four banks (total market capitalization – AUD420B in a country with a GDP of AUD2T) are dominated by residential lending. Any significant increase in bad loans would cause chaos in the entire economy.
So, the reserve bank is continuously assuring the sheeple that things are just fine and that the boom won’t end. And of course, they cannot afford to raise interest rates. To me it is reminiscent of the late 1980’s boom in Japan, and we all know the price those people paid when the music stopped.